One of the more commonly used strategies by investors is to follow insider transactions. Some might even assume that since insiders are “in the know”, they might be better equipped to predict the share price of a company.
Consistent insider purchases may indicate an undervalued share price. On the other hand, there might be others who would turn the argument around and say that if insiders are selling, then bad news is likely to be around the corner – though it must be noted that there is no basis for that as insiders might be selling for their own personal reasons.
In addition, a company buying back its own shares can also be considered insider activity. After all, these purchases are sanctioned by management. A company which is actively buying back its own shares might also be building shareholder value if the shares being bought back are considered to be at a lower price than the company’s intrinsic value.
With these in mind, let’s take a look at two companies with insider activity over the past two weeks.
1) Manufacturing Integration Technology Ltd (SGX: M11)
Manufacturing Integration Technology has a reputation for being a leading provider of integrated automation solutions to the global semiconductor industry. The company mainly designs, develops, and distributes a diverse range of automated equipment that caters to the front and back-end processes of IC (integrated circuit) assembly.
The company’s flagship range of high-end semiconductor equipment includes vision inspection, wafer level die marking and sorting systems, tape and reel systems, and laser markers. Infineon Technologies, ST Microelectronics, ASE, and Micron are just some of Manufacturing Integration Technology’s more well-known customers in the region.
On 9 September 2014, Mr. Kam Boon Cheong, an independent director of the company, acquired 167,000 shares at an average price of S$0.076 each. Following the purchase, his deemed interest in the company grew slightly from 0.561% to 0.637%.
The company last traded at S$0.068 and has not reported any positive earnings for the year-to-date. It does not offer any dividends too.
2) Courts Asia Ltd (SGX: RE2)
Courts Asia is arguably Singapore’s largest electronics and furniture retailer and it has an operating history of more than 40 years here. Malaysia is another important geographical market for the company; it has been in business there for more than 25 years and holds second spot in terms of market share..
Courts Asia currently has more than 70 stores which cover over 1.4 million square feet of retail space. Going forward, the company’s growth strategy is centered on store count expansion in Malaysia and Indonesia. In addition, Courts Asia would also focus its sales strategy to encompass both traditional retail and online sales channels.
Courts Asia has been actively purchasing its own shares back from the open market since 20 Aug 2014, after the release of its 1st quarter results. On 15 September – the date of its latest purchase – the company bought 100,000 shares at S$0.455 each for a total sum of S$45,665.
The company’s latest share buyback mandate started on 30 July 2014 and would allow buybacks for up to 55.57 million shares. Under this mandate, the company has so far bought back 1.2 million shares. For some sense of scale, Courts Asia had 555.74 million shares outstanding as of 30 July 2014.
Courts Asia last changed hands at S$0.450. With that, the company’s price to earnings ratio stands at 9 while offering a dividend yield of 3.34%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.